I have been browsing several posts on 401k loans and haven't really received a straight answer on my question, so here it is:
If you are taking a 15k loan at 4.25% interest on a 401k, are you physically removing that value out of your investment options?
If so, as you pay back your loan, is the loan principal and the loan interest (less a tax deduction on the interest), then applied back into your investment options with each payment?
With both those being true then although a PRO is that during the loan you are 'loaning' money to yourself and paying yourself the interest, a definite CON is that while that money is loaned it is not appreciating with your other 401k investments.
Assuming that the money you loan is used in an investment that appreciates faster (for the hypothetical assume it was guaranteed to) than the 401k investment appreciation (accounting for the expense ratios) during the period of the loan, this is would be a 'better investment', correct?
Thanks in advance for helping me think through this. Also, I am looking at this is a hypothetical and taking out the emotional side of borrowing from retirement money and assuming no risk in loss of employment relating to any risk of default.